FSCS to demand £46m extra from IFAs as pension claims rise

Pedro Gonçalves
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FSCS to demand £46m extra from IFAs as pension claims rise

The Financial Services Compensation Scheme (FSCS) has warned advisers they will have to pay their share of a £46m interim levy this year after a surge in bad pension advice.

In a statement, the FSCS said it "expects" to raise the additional levy from the life distribution, pensions and investment intermediation class after it has received £20m more in pensions claims than expected this year and with the collapse of a number of investment firms.

The scheme pointed to "more complex and more expensive" pension claims and a number of high profile investment failures such as SVS Securities and Reyker Capital as cause for the additional costs.

I recognise the concerns about the rising trends in compensation costs"

The additional £46m includes a contribution from providers in the sector and reflects a jump of £44m in the compensation FSCS expects to pay out this year. 

"The main area of claims, £162m of total costs of £237m, is in relation to pension advice. We have experienced more complex, and more expensive claims in this area and this has increased the cost by £20m," the FSCS said.

"We also expect to make 1,200 (58%) more decisions in relation to general investment activities against a variety of firms. As we are likely to have to deal with claims from the recent failures of SVS Securities and Reyker Capital, there is an allowance for this increase and we will update it in the new year."

Advisers have already seen a marked increase in their annual regulatory bills this year, which has largely been driven by growing FSCS costs. 

Despite fees from the FCA dropping slightly this year, advisers have pointed to the FSCS levy as cause for what in some cases has been a 30% larger bill. 

The lifeboat's new chief executive Caroline Rainbird said she recognises the frustrations of the rising compensation costs issued to levy payers and to try to prevent future claims the FSCS has begun sharing data with the Financial Conduct Authority as part of an anti-phoenixing working group.

"I am deeply conscious that without levy payers' funding and support we cannot expect to meet our goals.

"Since joining FSCS in May, I have spent time meeting firms and trade bodies to hear views on the operation of FSCS and our funding.

"I am pleased to hear that the industry acknowledges the vital role FSCS plays in helping to protect the customer and support market confidence and financial stability and accepts its role as our funder.

"But I recognise the concerns about the rising trends in compensation costs. It is key for us to work together to reduce compensation - avoiding consumer detriment and costs to the industry."

 

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